What Are Meme Coins?

18/02/2022 By Author

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TL;DR

In 2021, the meme coin market saw exponential growth, especially the dog-themed meme coins. As of November 2021, one of the most popular “breeds” is Dogecoin (DOGE) and its rival Shiba Inu (SHIB).

Meme coins are meme-inspired cryptocurrencies. They tend to be highly volatile compared to major cryptocurrencies like bitcoin (BTC) and ether (ETH). This is likely because meme coins are heavily community-driven tokens. Their prices are usually influenced by social media and online community sentiments. This often brings a lot of hype but also FOMO and financial risk. While it’s true that some traders became rich with meme coins, many lost money due to market volatility.

Some say 2021 was the year of “dogs” for crypto. The doggy duo Dogecoin (DOGE) and Shiba Inu (SHIB) led the meme coin pack and skyrocketed in price and market capitalization. As of November 2021, DOGE has gained over 8,000% since the beginning of the year and is ranking #9 by market capitalization on CoinMarketCap. Its competitor, SHIB, has pumped more than 60,000,000% since January.

Meme coins are cryptocurrencies inspired by memes or jokes on the Internet and social media. The first meme coin created was Dogecoin (DOGE). Launched in 2013 as a parody, DOGE was inspired by the popular Doge meme of a Japanese Shiba Inu dog.

Meme coins tend to be highly volatile. They are mainly community-driven and can gain popularity overnight due to online community endorsements and FOMO. Still, their price can also slump unexpectedly when traders turn their attention to the next meme coin.

Another characteristic of meme coins is that they often have a huge or unlimited supply. For example, Shiba Inu (SHIB) has a total supply of 1 quadrillion tokens, while DOGE has no maximum supply, and over 100 billion tokens are already in circulation. As meme tokens generally do not have a coin-burning mechanism, the huge supply explains their relatively low prices. With just $1 USD, you can buy millions of meme tokens.

While it’s hard to define specific reasons, some say that during the COVID-19 pandemic, the crypto market grew as retail investors wanted to hedge against inflation. Meme coins also boomed amidst the hype, growing both in market capitalization and variety.

It all started after the “meme stock” saga of GameStop (GME) and AMC Entertainment (AMC) in late 2020, where the Reddit community pumped up the prices of these shares to as much as 100 times in a few months. In January 2021, a Reddit group joked about pumping up the price of DOGE to create a crypto equivalent of GME. The trend caught on, and along with the influence of Tesla CEO Elon Musk’s tweets, DOGE price rallied. Dogecoin reached a new all-time high of $0.73 USD, with an increase of over 2,000% in five days.

However, in May 2021, Elon Musk joked about DOGE publicly on TV, and many say it was the cause of the following price drop. Several traders then turned to other meme coins on the market, such as the “Dogecoin killer” SHIB. At the same time, retail investors were FOMOing into meme coins hoping to become millionaires overnight, sparking yet another meme coin rally.

Another reason why retail investors find meme coins attractive is that they typically only cost a few cents or even a fraction of a cent. Technically, the low price doesn’t mean much because these coins have huge supplies. Still, holding millions of a certain meme coin feels different than holding a fraction of ETH or BTC. Traders can get thousands or even millions of DOGE, SHIB, or Akita Inu (AKITA) tokens with just a few dollars.

Apart from the potential profits, the meme coin frenzy is also driven by their respective community sentiments. As mentioned, meme coins are inspired by popular Internet memes, intended to be fun and sometimes considered an “insider joke” for a community. Buying meme coins, in a way, is showing support for their respective community. Following the GME stock market saga, meme coin traders inspired by the Reddit group SatoshiStreetBets started a “David vs. Goliath” battle to bet against the mainstream cryptocurrencies. The crypto market in 2021 was therefore flooded with community-driven meme coins.

Meme coins might have seen exponential growth in 2021, but like all cryptocurrencies, trading and investing in meme coins carries high financial risk.

First of all, the tokenomics of meme coins can be concerning. Take Bitcoin as an example. It has its blockchain, a well-written whitepaper, an established ecosystem, and a deflationary nature. We are seeing more institutional adoption of bitcoin in recent years as well. Compared to BTC, most meme coins are inflationary with no maximum supply. Their ecosystem, use cases, and fundamentals are often defined by the collective jokes of the community. Only a few meme coins were built on the technology of major cryptocurrencies. For example, DOGE’s technology was derived from Litecoin (LTC), and SHIB was built on the Ethereum blockchain.

Another potential risk is that meme coins are heavily community-driven and are more speculative than the larger market capitalization cryptocurrencies. This volatility constantly leads to unexpected pump and dump. The lifecycle of meme coins is generally short-lived. Their prices can rocket thousands of times from celebrity shilling or FOMO, or crash unexpectedly when the community decides to move on to the next meme coin.

As the meme coin market continues to grow, you should be aware that there might be projects taking advantage of the hype to scam traders. For example, Squid Game (SQUID), a meme coin inspired by the popular Netflix show of the same name, surged over 86,000% in a week. However, the development team rug-pulled suddenly and caused the price to plummet by 99%. What’s worse is that holders were not allowed to sell their SQUID tokens. Therefore, you should always be careful and DYOR before trading or investing in meme coins.

Leading the meme coin market with the highest market capitalization are Dogecoin (DOGE) and Shiba Inu (SHIB). After the success of DOGE and SHIB, a large number of dog-themed meme coins entered the market and gained traction within the second half of 2021.

Dogecoin (DOGE) was created in 2013 by software engineers Billy Markus and Jackson Palmer. It was inspired by the meme of a Shiba Inu dog and was intended to be a joke cryptocurrency to attract mainstream attention. As a fork of Litecoin (LTC), DOGE adopts the same Proof of Work (POW) mechanism, and it has no maximum supply. For a more comprehensive overview of DOGE, check out What Is Dogecoin?.

Shiba Inus (SHIB) is the rival of DOGE and is often referred to as the “Dogecoin killer”. SHIB is also named after a Japanese dog breed. It was created by an anonymous developer named Ryoshi in August 2020. The main difference between DOGE and SHIB is that the latter has a limited supply of 1 quadrillion tokens, of which 50% were burnt and donated to charity. SHIB’s ecosystem also includes a decentralized exchange, an NFT art incubator, NFTs, and an NFT game.

Dogelon Mars (ELON) closely follows the doggy duo in terms of popularity. As the name suggests, ELON is named after Tesla CEO Elon Musk and his passion for his company SpaceX. ELON is a fork of Dogecoin and has a circulating supply of 557 trillion tokens. As of November 2021, ELON has surged over 3,780% since its launch in April 2021.

There are many other meme coins using Japanese dog breeds as their mascots, such as Akita Inu (AKITA), Kishu Inu (KISHU), and Floki Inu (FLOKI). AKITA was heavily inspired by DOGE. It was launched on Uniswap as an ERC-20 token in February 2021. Its tokenomics is very similar to SHIB. Like SHIB’s developer Ryoshi, the AKITA team locked 50% of its total supply on Uniswap, while the remaining 50% was sent to Ethereum co-founder Vitalik Buterin. However, AKITA only has a total supply of 100 trillion tokens, which is 1/10 of the total supply of SHIB. AKITA gained traction alongside its fellow doggy coins in May 2021 and is seen by some community members as another “Dogecoin killer”.

Samoyedcoin (SAMO) is a dog meme coin project built on the Solana blockchain. At launch, 13% of SAMO supply was airdropped to members of the community. According to their website, SAMO roadmap includes burning events, airdrop tools, a decentralized exchange (DEX), and the creation of NFTs. Samoyedcoin recently gained popularity due to a sudden increase in price. SAMO grew over 4,300% within a month. In October 2021, the price went from $0.005 to over $0.22 in roughly 30 days.

Kishu Inu (KISHU), another canine-themed meme coin, has grown exponentially since it launched in April 2021. KISHU includes participation rewards for active users, non-fungible tokens (NFTs), and a DEX called Kishu Swap. It has been growing in popularity and recorded over 100,000 holders and 2 billion dollars market capitalization within one month after its launch.

Another meme coin newcomer that capitalized on the rally was SafeMoon (SAFEMOON). It is a BEP-20 token launched on the Binance Smart Chain (BSC) in March 2021. SAFEMOON rewards long-term holders by penalizing those who sell the token with a 10% exit fee, of which half of the fees will be distributed to existing SAFEMOON holders, and the other half will be burnt. It attracted retail investors’ attention after it soared in April. As of November 2021, SAFEMOON has a 9418.54% ROI, according to CoinMarketCap.

You can buy the more popular meme coins, such as DOGE and SHIB, on cryptocurrency exchanges like Binance. For other less prominent meme coins, you can go to decentralized exchanges.

Let’s take DOGE as an example.

1. Log in to your Binance account. Then, head to [Trade] at the top bar to select the classic or advanced trading page.

2. On the right side of the screen, type “DOGE” on the search bar to see a list of the available trading pairs. We will use DOGE/BUSD as an example. Click “DOGE/BUSD” to open its trading page.

3. Scroll down to the [Spot] box and enter the amount of DOGE to purchase. You can select different order types to buy DOGE. We will use a Market order in this example. Click [Buy DOGE] to confirm the order, and you will see the DOGE you purchased in the Spot Wallet.

With new meme coins entering the market every day and traders hoping to replicate the profits posted by DOGE and SHIB, it is important to DYOR before committing to any meme coins. Keep in mind that meme coins are highly volatile compared to other digital currencies. Trading or investing in cryptocurrencies involves high risk. Meme coins are largely community-driven and might crash unexpectedly, so you should never invest what you cannot afford to lose.

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